Read below to know how blockchain can help retailers address several business problems and helps to grow in their retail industry.
Blockchain, bitcoin, cryptocurrencies, distributed ledgers- the development around technology is happening at a fast pace. The blockchain technology provides the platform for cryptocurrencies and the market for initial token and coin offering sales. Since bitcoin is in the headlines because of its soaring valuation, blockchain's effect is misunderstood as barely affecting the financial sector.
The retail industry is one of the early acquirers of blockchain technology, and retail companies using blockchain to enhance customer experiences and improve inefficiencies. Retail industries who were ignoring this trend should pay attention to it; instead, blockchain must be considered as a valuable tool.
What is Blockchain?
Blockchain technology allows immediate and secure transfer of assets on a distributed ledger that settles and records a transaction through the engagement and verification of members in the blockchain. Each member in a blockchain has the same record of all the transactions associated with the assets being traded-off in that blockchain.
With the initiation of a new transaction, rather than relying on a central intermediary (like a trustee or a bank) to confirm and settle the transaction, each member's ledger is put together, and the consensus of the group approves the transaction. With each new transaction, every member's ledger is updated to show the new possession of the assets within the blockchain.
It is a disruptive process as it can potentially lower the cost of transactions by erasing third-party fees and make them more secure by eliminating the requirement for a middleman to resolve the transaction. Moreover, there are many identical copies of each transaction of a blockchain among the members, so any security violation in any one record will not have an impact the whole process.
To manipulate the record of a transaction in a blockchain, several copies of the distributed ledger will have to be manipulated in the same manner to establish a consensus around the forged record.
Rather than trying to understand what blockchain is, it is important to understand what blockchain can do. For example, understanding Internet and how it works is not a prerequisite for the global application of the technology. In fact, a parallel has been made that what Internet did for communication, blockchain will do for the transaction of assets.
Blockchain’s Retail Industry Potential - Blockchain can help retailers address several business problems, including the following:
1. Improve Inventory Management
With shorter product life cycles and growing complexity of Stock Keeping Unit (SKU) management, sales prediction has become more difficult for nationwide fashion apparel retailers. The retailers and their supply chain vendors could use a blockchain solution that provides a single source and uses smart contracts to allow the automation execution of orders and payments.
The upgraded supply chain will increase the operating efficiency and give more accurate forecasts, stopping over-ordering and reducing lost sales due to stock-outs. For example, IBM is working on a global supply chain solution in collaboration with shipping giant A.P Moller-Maersk.
The blockchain solution is being tested among retailers and has the power to eliminate the costly inefficiency of international business related to paperwork burden and regulatory of shipping across borders.
2. Ensure Product Authenticity
The growth of fraudulent products that are difficult to single out can result in declining sales and value of genuine products by designers of luxury consumer merchandise. A blockchain for retail industry can build trust by allowing the customers to scan a code etched permanently on the product and gain access to the entire record of the product, including the succession of ownership.
3. Build Consumer Trust
By tracking the origin of a product, blockchain can be used to enhance consumer trust by verifying the credibility of expensive and rare products. The authenticity of expensive jewelry like diamond earrings can be verified on blockchain and build a consumer's trust in the value of the asset. Retailers using blockchain to verify the originality of their products may see a competitive benefit in the market.
Grocery retailers specializing in Genetically modified (GMO) free and organic food products would profit from the ability to build up confidence among the customers doubtful that organic labels are just a marketing gimmick to charge a higher cost. Supermarkets and their supply chain partners can make use of blockchain solution to increase confidence in their products by permitting customers to track the travel of a product from the origin to the store.
4. Enhance Consumer Loyalty/Rewards programs
Many companies have devised programs to cover various brands in an effort to grow customer satisfaction while lessening their liability. A blockchain application allows the consumer to redeem points across different merchants and platforms easily (Android and iOS), which reduces liabilities and improves customer satisfaction, while also decreasing the potential for fraud and cutting operating cost.
Loyalty reward points are a form of digital currency; thus the development of issuing and redeeming loyalty reward points on a blockchain is an important application of the technology. Using blockchain to maintain loyalty programs will ease the friction involved in earning and redeeming rewards, and the companies can also track the consumers' behavior better with this process. Companies can improve their brand loyalty and take benefit of the additional data gathered through these programs by enhancing the experience of consumer reward programs.
5. Blockchain’s Broader Impact
The retail sector will be affected by the blockchain's broader impact and will continue to affect securities trading, securities offering, and corporate governance. Giants in the financial industry are all working towards the digitalization of securities on the blockchain. This change will allow more accurate and faster trading and less expensive record keeping for business.
Corporates are also impacted by blockchain as it allows the blockchain technology to create and maintain a corporate stock ledger and communicate electronically with stockholders. These modifications open up the probability of issuing stocks and distributing stockholder communications on a blockchain.
Blockchain solution will revolutionize not only the process of a business working in the retail sector but also the corporate governance and fundamental structure of retail industry. Blockchain technology is proliferating, and retail sector is one of the first industries to experience the practical implementation of the new technology. It has the potential to become a necessity rather than a false instrument, and the retail sector is seeing the impact of its application.